1. Legal Background: Termination, Severance and Unfair Termination in Thailand

1.1 Termination with cause vs without cause

Under Thai law, an employer may terminate employment:

1. With cause – relying on statutory grounds (for example, dishonesty, serious misconduct, serious damage to the employer). These grounds are primarily listed in Section 119 of the Labour Protection Act (LPA). If termination is validly based on Section 119, the employer can terminate without severance pay, but must be able to prove the cause.

2. Without cause – for business reasons, company restructuring, redundancy or any other reason that is not a Section 119 ground. In that case, the employer must provide proper notice (or pay in lieu of notice) and pay statutory severance and other accrued benefits.

1.2 Severance and other statutory payments

For termination without cause, employees are generally entitled to:

• • Notice or payment in lieu

• • Statutory severance (30–400 days of the last wage, depending on length of service)

• • Unused annual leave

• • Any other contractual and statutory entitlements

Severance currently ranges from 30 days to 400 days of the last wage, depending on years of service.

1.3 “Unfair termination” is a separate issue

A key point that often surprises foreign employers:

• • Thai labour law does not contain a precise statutory definition of “unfair termination”.

• • Instead, the concept has been developed mainly through Section 49 of the Labour Court and Labour Procedure Act and Supreme Court precedents.

Case law shows that unfair termination basically refers to dismissal without legitimate legal cause and/or without following proper termination procedures, even if notice and severance were paid.

In other words:

You can fully comply with the Labour Protection Act on payments and still face an unfair termination claim in the Labour Court.

1.4 Remedies for unfair termination

Under Section 49, if the Labour Court finds that the termination is unfair, the Court may:

• • Order the employer to reinstate the employee with the same wage; or

• • If reinstatement is not appropriate (for example, relationship is broken), order the employer to pay compensation for unfair termination on top of statutory severance and other payments.

When fixing compensation, the Court typically considers factors such as:

• • Age of the employee

• • Length of service

• • Hardship caused by the termination

• • Reason for termination

• • Amount of severance and other payments already received

In many decisions, compensation has been calculated at roughly 1–2 months’ wages per year of service, with a cap that depends on the circumstances of the case.

2. Restructuring-Based Dismissals: What the Labour Court Looks At

When termination is justified by “restructuring” or “reorganisation”, the Court generally does not simply accept the employer’s label. It looks at substance, not just the wording in the termination letter.

In practice, the Court often examines three main questions:

1. Is there a genuine business necessity for restructuring?

2. Were fair, objective criteria used to select which employees to dismiss?

3. Did the employer reasonably consider alternatives before resorting to dismissal?

These three principles are also reflected in several Supreme Court decisions relating to restructuring and redundancies.

3. When Restructuring Termination Is Likely to Be Considered “Fair”

Thai Supreme Court decisions and expert commentary suggest that Courts are more likely to see restructuring-based termination as fair where all (or most) of the following apply:

3.1 Genuine business necessity

The employer should be able to show real necessity if the company will use the reason of unfair termination Thailand restructuring, such as:

• • Continuous accumulated losses or serious cash-flow problems

• • A major change to technology, automation, or business processes that genuinely eliminates certain roles

• • Significant and sustained reduction in business volume or workload

For example, in one Supreme Court case (No. 1324/2548), the employer had suffered continuous losses and needed to dissolve a department and redesign the organisation. Termination of employees in the abolished department was held to be based on reasonable cause and was not unfair.

Another case (No. 6520/2544) accepted that a real decline in work volume and a clear cost-reduction need could justify staff reduction, provided the employer used transparent criteria for selecting employees.

3.2 Clear, neutral selection criteria

Even if restructuring is genuine, unfairness can arise if the employer targets individuals arbitrarily or for personal reasons.

Courts will ask:

• • Why this employee?

• • What objective criteria were used?

• • Were the criteria applied consistently among employees with similar roles?

Acceptable criteria often include:

• • Past performance evaluations

• • Skills and qualifications (e.g., ability to work with new systems)

• • Seniority combined with performance, if applied consistently

• • Clear business needs of the new structure

Unacceptable behaviour includes:

• • Selecting employees simply because management dislikes them

• • Targeting union leaders or employees who have previously complained

• • Using restructuring as a “cover” for disciplinary issues that were never handled properly

When an employer can show documented, neutral criteria (e.g., performance scores over several review cycles), the Court is more likely to regard the termination as a business decision rather than an unfair dismissal.

3.3 Reasonable efforts to avoid termination

Thai law does not strictly require the employer to try every alternative before dismissal. However, showing that you considered alternatives can significantly strengthen a defence against an unfair termination claim.

Practical alternatives include:

• • Offering transfer to other vacant positions or departments

• • Implementing temporary cost-saving measures first (e.g., freeze on hiring, salary freeze, bonus reduction)

• • Providing a voluntary resignation or early retirement program

If the employer can demonstrate that termination was used only after these options were examined and found insufficient, Courts tend to see the decision as more reasonable.